I'm a co-founder of NorthBridge Energy Partners, LLC., a consulting firm that helps companies connect assets to power grids. I'm also a former Senior VP of Energy Technology Services for Constellation NewEnergy, Inc., and have 20+ years of experience in the energy industry. I've written for the Boston Business Journal, Mass High Tech and several other online industry publications. I have a B.A. from Williams College and a Masters from Tufts University’s Fletcher School.

The publication further stated “Engineers in all sorts of areas share similar feelings of disappointment,” with accompanying productivity and economic consequences. “A small but growing group of economists reckon the economic impact of the innovations of today may pale in comparison with those of the past.”

For all its flat-screen razzle and high-bandwidth dazzle, it seems the world has run out of major ideas. The argument that the world is on a technological plateau basically runs along three lines:

1) Economic growth coming from discovering ever better ways to use workers and resources has slowed. When in full stride, in the mid 20th century, real output per capita in the US grew at 2.5% annually, aided in large part by leveraging technology and machines. In the 2000s this has fallen to below 1%.

The Economist stipulates that this may be because the truly revolutionary game changers: development of the power grid (which radically affected productivity – see graph below), telephony, petrochemicals, medicines, and the internal combustion engine, can really only come along once. Additional changes are merely marginal.

2) Relatively less valuable invention is occurring. While the share of R&D in the US economy has actually grown in recent years to 3%, an increasing number of researchers are actually discovering less. Economists eyeing this specific area estimate that the average American R&D employee 60 years ago contributed almost seven times more to economic growth than a similar worker in 2000. The Economist suggest some of this may be due to ’the burden of knowledge’ that is “as ideas accumulate it takes ever longer for new thinkers to catch up with the frontier of their scientific or technical speciality.”

3) The things invented just are not as significant in contributing to change. Cars, kitchens, and appliances haven’t changed radically in the last 40 or 50 years. We may have more gee whiz features, but essential functions haven’t radically changed. We have the microwave oven and a few other things, but cars and planes aren’t much faster. We still haven’t figured out how Scotty can “beam us up.” As Thiel puts it “We wanted flying cars, instead we got 140 characters.” GoogleGoogle, FacebookFacebook, and Skype don’t seem to have yet driven massive economic growth.

Still, the Economist offers some reason for hope, suggesting that perhaps the effects of the information technology remain to be seen, and we are in a gestation period during which the positive economic effects have yet to appear. Some research suggests that this may be the case, and that the lag between investments in IT and communications and productivity is between 5 and 15 years. They draw a distinction between innovation – what people have just learned how to do – and technology – what they are actually doing. For example, almost a hundred years separated the steam engine innovation and its peak technology deployment in the British economy.

What about the field of utilities and electric energy? How does the field of energy look relative to the rest of the world’s technological improvement? If you look around you at today’s grid, there’s not much to be sanguine about. It is a tired truism that Edison would have little trouble recognizing today’s power grid: much of the hardware hasn’t changed in 50 years.

And yet, that view would obscure a storm of new innovation and technology deployment which may well radically change the power grid forever. The Economist’s distinction between innovation and technology may indeed help explain the slow rate of technology change and deployment to date relative to energy innovations taking place. There is a distinct time lag inherent here – especially where IT and Big data come in. The smart grid part of the industry really hasn’t yet gotten all that smart. But the technology distinction only explains part of the innovation/technology lag. The main factor in the slow rate of change probably has had to do with the structure and culture of the electric industry.

It is an industry that has been notoriously averse to promoting or accepting change. Well-known researcher and writer Massoud Amin notes “the current level of R&D funding in the electric industry is at an all-time low. In fact, investment rates for the electricity sector are the lowest of any major industrial sector, with the exception of the pulp and paper industry. The electricity sector invests, at most, a few tenths of 1 percent of sales in R&D (0.3 percent of revenues for 1995–2000 and 0.17 percent for 2001–2006), whereas the electronics and pharmaceutical sectors invest 8 to 12 percent of net sales in R&D.” Amin is fond of commenting in his frequent presentations on the topic of grid inadequacy that even the pet food industry invests more in R&D.

Culture plays a big role, and perhaps understandably so: the first priority of the utility industry is to assure supply, and to avoid failure. There are other contributing factors to lack of innovation as well:

1) The utility culture generally thinks of itself as providing a public good rather than a product. With a focus first and foremost on reliability and avoidance of risk, it is generally the antithesis of a culture that thrives on new and revolutionary ideas. It should not come as a surprise, then, that the most significant provider of demand response – EnerNOC – arose outside of the utility culture and had no executives with utility backgrounds. In fact, there are those who have commented that the utility is the place where entrepreneurs and their ideas go to die.

2) Further, utilities do not run the risk of failure or bankruptcy if they don’t keep up with customer wishes. If they did, a smart meter would do a lot more. It would not be a hermetically sealed conversation (for the most part) between the meter and the utility. Rather, it would also communicate to the user information useful in decision-making, about not just usage, but market prices, and grid conditions as well. It would make the consumer an informed participant in the energy conversation.

3) Utilities also don’t have to treat their customers like individuals with choices. The discipline of the free market would never support the types of investments occasionally contemplated in regulated markets with captive ratepayers. Few investors would freely pony up cash for in a planned nuclear plant with a 30-40 year lifespan, whose cost estimates have already jumped by 4x, to $24 bn, as has been the case with Progress EnergyProgress Energy’s Levy Plant over recent years. But in a regulated environment, ratepayers are the investors, and they bear much of that risk. In fact, by the end of 2013, Progress will have already collected $750 million from its customers to finance construction of the Levy plant, money committed irrespective of whether Levy is ever built. Imagine current users of the iphone 5 having to pay Apple a downpayment now for an iphone 9, due out in 10 years, even if it never comes to the market.

4) The regulatory thicket creates a market that makes the former Yugoslavia look easy. The Federal Energy Regulatory Commission, North American Electric Reliability Council, State PUCs and local town governments all have a say in deployment of many energy-related technologies.

5) Meanwhile, the distribution side is characterized by hundreds of utilities. So a technological change developed or brought to market on behalf of or through the utilities would have to be separately implemented by hundreds of utilities on behalf of their customers. It is the antithesis of a open and universal free market for millions of consumers who can otherwise rush to buy the latest Android, iphone, or car.

A real world example of the difficulties of working through the utilities would be the case of VirtuWatt, a software platform developed by Constellation Energy (now Exelon) in 2009 to allow retail customers to see both power consumption and prices in real time. VirtuWatt lets users bid electricity they would otherwise have consumed into some power markets, and can also – in some instances – facilitate an automated response. For the first time, customers can be part of the daily energy conversation and change the way they consume power.

However, this type of platform cannot be universally deployed. Why? Because the platform cannot easily access real-time electricity usage information from the utilities, even where smart meters exist.

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Pundits have long gazed into the future with closed eyes predicting declines that never materialize (http://www.inventionmysteries.com/article4.html). The pace of technological innovation continues to accelerate. It’s the shape of invention that changes. In the past, inventions had a physical component, today it’s intellectual (look, shape, algorithmic, concept, etc.) The best is yet to come as we get better at using what we have and information will be key to making it happen.

Unfortunately, to-date, Energy Innovaiton at the public utilities has been a bit of a two-edged sword, primarily driven by the perception of the industry about what customers are willing to take, as well as what they are willing to pay for. If you ask energy consumers about making innovation investments, most will say “just lower my bill, I will take that instead of your innovation.” With energy companies internal mantra of lay low and don’t stir up controversy – internal business decisions are predictable as a result of this attitude. Innovation is a gamble, it comes at a cost, and we see the trail of innovation littered with the bodies of pioneers. Utilities are inherently risk averse. That being said, there is little excuse for Utility companies to not take the lead in innovation in the area of energy use and behavior management.. Our recent research shows that the majority of American electric utility customers say their utility fails to provide them with sufficient tools to manage their energy use; that in spite of increased spending for DSM and demand programs. Smart meter deployment, to-date, has been a utility-focused initiative with low engagement, or no engagement tools, systems and processes set in place for end users to take advantage of. This is the industries’ bridge to nowhere as far as consumers are concerned. With this lack of a next-step developed and planning, utilities risk the possibility of never getting the level of engagement they need to make their investment optimized. We have contended for a period of time that third-party developers are shaping the conversation in energy innovation and the utilities are going to find themselves way behind the curve, being dictated to about future direction instead of being a respected partner in the process.

Jules – Your insights strike me as spot on. The whole ‘smart meter’ thing jumped out of the box too quickly – driven by stimulus money, before it could be honed by experience and mistakes into what the market wanted. The utilities missed the opportunity to engage their customer, and kind of did get that bridge to nowhere. I was at a conference where one exec stated his utility didn’t know: a) who owned the data b) what to do with it c) what usage intervals to keep (5- minute? 15-minute? hourly?) d) how long to keep it The cart was so far ahead of the horse, it hit the poor beast from behind!

It is true that utilities operating as monopolies with regulatory mandates have slowed in innovation. The state of networks and customer service applications are too far behind other industries (compare with telecom and retail). However, recently we are seeing encouraging spate of innovation for consumer energy usage. This is driven by regulatory mandate, as well as emerging technology trend of Consumerization. Even now, innovations and capital investment in rolling out their applications is miniscule for generation and transmission side of business.

The regulatory mandate is interesting in that it OPENS up the customer to innovation from the outside, but doesn’t generally encourage the utility to do the innovating – not that they’d be likely to. I once saw a utility/supplier where the CEO essentially stated he wanted innovation to drive 5-10 of new growth. First thing they did was set up an innovation committee. huh? That’s not quite how new ideas evolve or get adopted. Never has been.

As an electiricty consumer I don’t want to be involved in a “daily energy usage” conversation with my provider. I just want to flick a switch and the light comes on. Why do we always have to make everything in modern life ever more complex?

John – you probably won’t have to be involved in that daily conversation if you don’t want to. But that conversation involves making things more efficiency, so if you opt out, you will likely end up paying more.

I thought that The Economist missed an area that really needs innovation — government. The huge influence of money all comes in on the side of incumbents.. I wish the President had used his visit to the Chamber of Commerce a few years ago to ask for a revised tax code that would favor innovators. Edward Luce of the FT in his book “Time to Start Thinking” quotes a Washington insider that the fossil fuel industry owns Washington. Another area I think The Economist missed is big data and health care which I have written about several times on Forbes. Just showing which procedures are a waste of time is one big step but it can do a lot more in showing what works and in what ways. Will this innovation worry look like “The world will never need more than five computers” sort of predictions?

Tom – totally agree with big health care and data. I think their point that the lag time between innovation and deployment is particularly true in this area. And your point on gov’t. dong more to foster innovation is well-taken. Incumbents always have more influence – they have something to lose. That’s how stagnation occurs at national level. At the corporate level, that’s where Schumpeter comes in: “Every piece of business strategy acquires its true significance only against the background of that process and within the situation created by it. It must be seen in its role in the perennial gale of creative destruction;”

“The smart grid part of the industry really hasn’t yet gotten all that smart. But the technology distinction only explains part of the innovation/technology lag. The main factor in the slow rate of change probably has had to do with the structure and culture of the electric industry.”

“Amin is fond of commenting in his frequent presentations on the topic of grid inadequacy that the even pet food industry invests more in R&D.”

Personally, the preceding two excerpts from this excellent piece immediately make me think that the pervasive nature of utility is to remain 20th century based. The perpetuation of innovation stagnation… is currently being played out in Atlantic Canada with the emerging utility Emera mega project Muskrat Falls. The silo being created shuts out and down making the grid smarter in favor of green generation from 1600 kilometers from my city Halifax and involves to ocean cable crossings and a third cable into the NE of the United States. It will mitigate coal fired generation yet that is still the reality here in Nova Scotia…like California we via gov’t initiative will have 20% sourced green energy from Solar, Tidal, Wind and Hydro eventually this decade. Regional SMART grid tech needs to be the 21st century thinking approach to facilitate productivity gains, that said I keep hearing but not experiencing the methods and manners of Utilities delivering the consumer economic synergy. FWIW the Internet uses over 10% of all global output of electricity by some estimates and it will serve as the mortar and pestle of innovation for mutual beneficial energy synergy for consumers ….let’s hope this decade For the latest on Emera’s Muskrat Falls see http://thechronicleherald.ca/canada/550599-blogger-mounts-costly-muskrat-falls-fight or enter Muskrat Falls into any search engine

im pretty familiar with that centralized dynamic, having been involved as a consultant to the Cree Indians 20 years ago in their fight against Hydro-Quebec’s Great Whale project. One good thing about large hydro: it represents massive (in some cases inter-annual) storage. Properly utilized, it can facilitate the integration of significant amounts of intermittent renewables.